Thursday, June 25, 2009

Tata Motors likely to report loss

Tata Motors is likely to report a consolidated loss for the financial year ended March 31, 2009 — the first time in eight years — mainly due to poor performance by its UK subsidiary, which owns the marque brands Jaguar and Land Rover.

According to analysts and broking houses tracking India’s largest commercial vehicle maker, the consolidated loss for Tata Motors could be in the region of about Rs 300 crore for the financial year owing to weak sales by the UK unit and high interest costs from a Singapore subsidiary.

In the fiscal year 2000-01, Tata Motors had reported a standalone loss of Rs 500 crore due to weak sales of commercial vehicles — its mainstay. Tata Motors refused to comment for this story saying it doesn’t give guidance on the financial results. The company is scheduled to announce its consolidated results on June 26.

According to four brokerages that ET spoke to, the loss of Tata Motors’ UK units could be about Rs 900 crore, interest costs from TML Holdings, the Singapore holding company, totalled Rs 400 crore in the previous fiscal year, while losses from Tata Motors Financial Services could be about Rs 100 crore.

Sales of Jaguar and Land Rover, the luxury brands, hit a rut after tight liquidity post the Lehman crisis affected car sales in Europe and the US. After seeing a 16% decline in the calendar year 2008, sales of Jaguar & Land Rover were down 17% in the January-March period in key US and European markets, says a recent Merrill Lynch report. However, demand from other markets, such as Russia and China, improved slightly.

Tata Motors bought Jaguar & Land Rover for $2.3 billion (about Rs 11,200 crore at the current exchange rates) in June 2008, surprising the global auto industry. The Tata Group already has a presence in the UK through tea firm Tetley and in steel after acquiring Corus. Shares of Tata Motors were up 4.2% at Rs 357 on BSE on Wednesday.